FINRA

News

The Department of Justice has filed over 46,000 cases against individuals for mortgage fraud since the Great Recession. Aside from Lee B. Farkas, former Chairman of Taylor, Bean & Whitaker serving a 30-year sentence, all of the other cases have been against low level employees who do not have any name recognition or even any responsibilities for much of their organizations.

from Leom Lime Moon at Blogspot

Explanation

The main take away is that managers really have no liabilities. The rationale seems to be that managers are not licensed professionals, so they don’t have a higher standard to meet. The main higher standard might be that a lack of knowledge absolves them of accountable because they do not have a professional’s training and certification. How could a non-professional be accountable for knowledge s/he has no knowledge about? A professional would be liable for knowing certain things about their work and if s/he doesn’t know, then the professional is accountable for not doing his/her job correctly.

Opinion

Here’s my stance on all this. The solution isn’t to prosecute non-professional managers for things they should have known. There is nothing in corporate charters that require managers to be professionals. (Here, I’m using the word professional in the traditional sense, a person who is licensed to practice a certain craft or use certain knowledge.) The solution is to make managing professionals a profession. Currently, banks are managed by people who don’t really know how to operate their own banks; they know how to manage the people who do. But shouldn’t they know how their bank operates? The answer, in my opinion, is “yes.”

So, while I don’t believe that bank holding companies need to be managed by professionals because what is needed at that level is quite different than individual bank units, these individual units should be managed by professionals in and of that field. Projecting out, what will happen in the future with this standard in place would be that future bank holding company executives will be a banker from those units.

A small group of people have argued that bank executives are professionals because almost all of them come from investment banking backgrounds and they hold Series licenses from FINRA. The problem there is that taking away their license to sell securities does not bar them from managing a people who do, let alone other bank units. My solution would solve this for the most part because people will not be allowed to climb the ladder of another bank unit without that license required to practice in that bank unit.

Economically, what will happen is that this will allow large bank holding companies to exist. But this standard will force units to shrink and many more units be created. The pyramid will be at the state-level, and executives will be plucked from those levels. Large national banks may have multi-state regions but those will also be led by former state-level unit managers, making them at least accountable for maintaining the professional standards of one profession. Eventually, the only qualified national bank managers will be people who used to run banks.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.

Money Laundering is the process of making earning from criminal activities into legitimate money. It’s called “laundering” because the money from criminal activities is considered “dirty” money, so, “laundering” it would “clean” it. AML is the activity of preventing and identifying those activities.

The general process of money laundering begins by placing the dirty money into the financial system, layering it under the cover of a legitimate business and then integrating it by acquiring the funds legally. There are various strategies and tactics to successfully laundering money but with the aid of technology and broader reach of the global financial system, it is much more difficult to succeed.

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Because there are so many ways and so many places criminals try to launder money, there are many organizations involved. FATF was formed to provide guidelines for enforcement of anti-money laundering activities. All of the financial regulators are involved in oversight, review, exam and enforce AML activities. Intelligence and law enforcement organizations are also involved because the criminal activities tend to be mixed with other criminal activities.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.

The Office of Foreign Assets Control (OFAC) is a financial intelligence and enforcement organization of the U.S. government charged with planning and execution of economic and trade sanctions in support of U.S. national security and foreign policy objectives. Acting under Presidential national emergency powers, OFAC carries out its activities against problematic foreign states, organizations and individuals alike. – Wikipedia

Randall Park in The Interview via Historias Bastardas Extraordinarias

Historically, OFAC was dealing with sanctions on Iran, North Korea and Cuba, the usual suspects. But nowadays, OFAC also deals with individuals connected to Russian President Vladimir Putin and individual terrorists.

Making a career in this area of regulations involves great amount of interest in both financial crimes investigations and geopolitics. It also involves keeping up with information on what other regulatory bodies are doing, such as FinCEN, FINRA and Department of Homeland Security.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.

On Monday, January 26, Associations of Certified Anti-Money Laundering Specialists (hereon ACAMS) held its Third Annual AML Risk Management Conference at The Conrad Hotel in downtown New York. Over the course of this week, summaries and takeaways from the key notes and panel discussions will be shared in this blog.

Regulators like to see consistency because it shows the effort an institution is putting into trying to be compliant.

Communicate to Boards of Directors that OCC would like to see more focus on compliance from them

Alert Suppression is okay and critical to executing priorities, but the alerts should be logged and revisited to keep the compliance programs up-to-date with the changing environment both ex-firm and intra-firm.

FINRA does not target individuals, though individuals will face penalties if found willfully unaware or intentionally non-compliant. FINRA focuses on systemic risks to protect investors.

FinCEN does not target individuals, especially trying to avoid dissuading the most talented compliance professionals from fleeing the most difficult problems.

Intra-firm talent development is key to today’s labor market where supply of veteran compliance officers are small compared to demand.

OCC intends to staff lead experts on all exams in the future.

The new OCC Exam Manual, published November 11, 2014, does not have much substantive changes, mostly it is an administrative update to make sure changes to exams since the last major update are documented.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.
He tweets @MoneyCompliance